– Available Collateral
– Limits – Broker, CCP, and Regulatory
– Cost of Funding / Drag On Performance
Initial Margin - Compare CCPs and Brokers
For each blotter of What-If trades, Cassini makes a call to the designated CCP to get an indicative Initial Margin based on adding those trades to the existing portfolio.
Cassini then also calls all other available CCPs and also calculates the Initial Margin if cleared through other clearing brokers and returns the full set of results for comparison.
Limit Rule Checking
All defined Limit Rules are checked against the live portfolio with the What-If trades added to ensure executing those trades will not create any breaches.
Limit Rules may include limits defined in the clearing broker agreements or related to the CCP. Limit rules can also be internal operational controls or represent external regulatory commitments.
Limit Rules are defined when the agreements are configured in the system but can be modified, or added to at any time via the maintenance screens.
Calculate all Deltas on Portfolio
The What-If analysis also calculates changes to a variety of portfolio valuations that would occur if the trades were executed. This gives you a true sense of impact of the trades prior to execution. The calculated delta values are all configurable but typical values calculated include:
Lifetime Cost of Portfolio
One issue that is becoming more significant is the selection of best collateral against each FCM/CCP. Cassini compares the eligibility and haircuts defined in each agreement, and reviews the available collateral pool intra day. This enables the system to identify the cheapest to deliver collateral at that point in time, and use that as the basis for defining the funding cost over the life of the trade.
Cost Of Funding
Cassini uses internal cost of funding rates, or measures of drag on performance to determine the cost impact of collateral required to meet the margin requirement. The system calculates the forward projected cost of funding over the life of the trade to give a true life cost.
Answer Questions Such As:
What does it cost to fund this trade ?
Is there a cheaper alternative contract ?
Is my collateral eligible and sufficient ?
Which FCM/CCP is the best clearing venue ?
Am I compliant with all CCP requirements ?
Calculating a projected lifetime cost of a trade before execution ensures that a true P&L is known and more efficient trades can be executed where available.
Better Use Of Collateral
Cassini can identify the best FCM or clearing venue to use that ensures best use of available collateral. Collateral selected by Cassini can then be notified to the back office collateral management team for end of day pledging.